ESMA has published its final regulatory technical standards (RTSs) for consolidated tape providers (CTPs).
Three RTSs are considered under the mandate. The first addresses input/output data, the second the revenue redistribution scheme, and the third clock synchronisation. Amendments to the standards have been made following a market consultation by ESMA.
“We’re happy with the outcome. Those are some elements that are already very clear and where our different suggestions have been followed,” Eglantine Desautel, CEO of CTP bidder EuroCTP. “ESMA is working on a tight schedule but delivering.”
“The final text aligns with the industry consensus that the requirements should not be overly prescriptive or necessitate extensive development of new data feeds by contributing venues,” added Stephen Dorrian, head of market data and access for Cboe Europe and board member for CTP bidder SimpliCT.
Input/output data
Responses to ESMA’s consultation on the standards were broadly against the use of the JSON data format, citing issues with large file sizes and insufficient speed.
“We’ve seen quite some adjustments of ESMA’s position on input data formats. Now it’s more open and flexible, which is useful especially for equities and ETFs, because the volume of data is huge,” Desautel explained.
“After consulting the market, ESMA is offering flexibility for the inbound data while still being compliant with the ISO 20022 methodological approach. This way, we will be able to work with the data contributors to make sure objectives are met.”
Changes were also made to minimum requirements for transmission protocol quality, following industry demand for latency requirements to be outlined in the assessment framework. Following the consultation, ESMA has stated that pre-trade data should be transmitted from data contributors to the CTP within 50 milliseconds and with a 95% confidence interval from the order submission timestamp. Post-trade data is also subject to these conditions, both for on-exchange and over-the-counter trades.
“We want the tape to be usable for the maximum number of users, so the speed of data transmission was important,” Desautel commented.
“We have been transparent about the fact that it would be better if the tape receives the same data feed as everybody else, to see what the rest of the market is seeing. ESMA’s drafts should allow us to achieve this.”
Flagging
The new standards have also introduced flagging data quality issues rather than rejecting messages outright if they do not meet certain criteria. This allows for discussions with data providers and a cleaner tape.
“The initial text was pushing for potential rejections of messages if they did not meet a certain number of quality criteria.”
“Flagging allows us to say something is suspicious. We can also better calibrate the size of the market, either taking everything or removing what we consider as duplicates,” Desautel said.
Next steps
Overall, Desautel is positive about the updated RTS. “When you build a platform, the devil is in the detail. But at this stage, we don’t see any major roadblocks that will require us to break things that we have been working on developing,” she said. “There are some very positive points that are set in stone, which is good.”
Dorrian commented: “With the final requirements now in place, firms preparing their consolidated tape bids can design their solutions with confidence and prepare for their submissions.”
“Europe needs a stronger infrastructure. We spent a lot of time drafting responses to the consultation to help the community build a regulatory framework that allows us to meet the objectives of the capital markets and savings and investment union. Everything that can be done to boost the attractiveness of European markets has to be done,” Desautel concluded.
The final report has been submitted to the European Commission, which will issue a verdict on the RTS amendments within three months. ESMA will begin its selection process for the equity CTP in June 2025.
FCA
Meanwhile, the FCA has issued an update on its equity consolidated tape progress.
In the publication, the authority outlines options for data inclusion policy based on market feedback. These include prioritising a post-trade data only tape, with the potential for including pre-trade data at a later date or including pre-trade data for a limited set of instruments before implementing a broader rollout. Another possibility is the use of pre- and post-trade data for all instruments, with pre-trade data determined by the best bid/offer or the top five bids and offers.
“Before we determine a position for consultation, we consider that there is more work we need to do with industry to fully assess the likely demand for an equity tape with these permutations in data, considering the strength of the associated benefits and scale of the related costs,” the FCA said in its report.
January discussions with market participants and trade associations will inform the FCA’s decisions on how the tape will be designed. The authority has invited potential CTPs to contact them before 10 January in order to participate in these. It will also be running an equity market participant survey to determine the cost-benefit analysis of an equity CT.
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